So it’s official: the military’s in for some police supervision. A special report by Newsbreak vividly portrays the intense lobbying -and jockeying- that clinched the appointment:
In early December, the department got word that it would be Public Works Secretary Hermogenes Ebdane Jr. A few weeks later, a newspaper report leaked by a high-ranking government official pointed to Defense Undersecretary Ricardo Blancaflor as the likely one. By January, a third name had cropped up: National Security Adviser Norberto Gonzales Jr.
The names floated partly represent the factions now working for the President – people who have stuck it out with her since six years ago when she was first catapulted to the presidency.
The winning faction? Well, see the factions and their candidates, and see who won:
A 1970 graduate of the Philippine Military Academy, Ebdane is closely associated with First Gentleman Jose Miguel “Mike” Arroyo, their relationship going back to months before EDSA 2, when Ebdane attended clandestine anti-Estrada meetings hosted by Mr. Arroyo.
Blancaflor is close to Executive Secretary Eduardo Ermita, having served as one of his deputies when Ermita replaced Reyes as defense secretary. Blancaflor helped Ermita run the controversial “monitoring center” at the department during the 2004 presidential elections.
Gonzales, on the other hand, is a power center by himself – largely because the President likes his fast, sometimes shortcut solutions to problems and because he is a friend of two individuals who have the ears of the President: her brother Diosdado “Buboy” Macapagal Jr., who is on a par with the First Gentleman in terms of access to and influence over the President, and Jesuit priest Romeo “Archie” Intengan.
Perhaps this parapgraph is the most illuminating in a fact- and insight-filled story:
Sometimes, if the President wants things done, she would text five people to do the same thing for her, recalls a former politician who’s been with her for more than a decade. “She’s impatient, doesn’t pass through channels. She thinks that if she sends the message to five, one will deliver.”
Read the whole thing, as it discusses the power blocs that exist in the Palace; how they’ve developed; and other details, such as the conversion of the President’s brother from a “dove” to a “hawk” and one of the chief proponents of martial law -and how ironically, the deal breaker was the military, which didn’t want to enforce martial law (which makes you wonder of news items like this: has there been a struggle going on even within the military, over how to handle the Left?):
We have it on good authority that Macapagal and Gonzales tried to persuade the President to declare martial law during this period. This move culminated in a visit of Gonzales to Washington, D.C. to drop hints about it to Philippine Ambassador Albert del Rosario, who opposed the idea, according to a friend of Del Rosario’s. (Del Rosario was sacked in June 2006.)
There was a series of top-level meetings about extreme measures to save the President (i.e., media and Left clampdown, arrest of “corrupt” politicians), says an insider, but in the end the idea flopped largely because the security forces – the police and military leaderships – displayed enough body language that said they didn’t have the stomach for it.
…The discovery and subsequent defeat of the coup toughened the view that by this time had begun to run through all the loyalist groups.
It went like this: she’s survived the worst because her opponents are weak and the public doesn’t care. This allows us room to push hard for changes and look even beyond 2010. “We had become very comfortable with power,” the Cabinet official concedes.
In other news, the senate race continues to grab the headlines. Francis Escudero was the first opposition candidate to file his papers for the senate race (accompanied by Susan Roces); The UNO Senate slate is almost-fully-formed (and pretty much a variation on the 4+4+2 ticket I discussed previously):
1. Manuel Villar, Jr.
2. Ralph Recto
3. Alan Peter Cayetano
4. Joker Arroyo
5. Francis Pangilinan
6. Benigno Aquino III
7. Panfilo Lacson
7. Francis Escudero
8. Loren Legarda
9. John Osmeña
10. Koko Pimentel
11. JV Ejercito
The 12th and last slot, I’d still wager, is a tossup between Edgardo Angara, Sonia Roco or Adel Tamano. But reports such as this may make an Angara alliance difficult with the opposition.
The Palace, on the other hand, claims the President has asserted her coalition leadership. Rep. Prospero Nograles says there’s no need for a caucus, and that the Lakas-CMd will abide by the President’s call for a “unity ticket”.
In other election-related news, the remaining Comelec vacancy may soon be filled; and Internet voting is apparently forbidden. And the Arroyos announce their candidates in Negros Occidental.
Silliest symbolic act: 3 solons go ‘fishing’ in Germany.
In the punditocracy, my Arab News column for this week is From Statesman to Political Hack.
Senate race related scuttlebutt and analysis from reporters RG Cruz (who debuts with his first formal opinion piece on ABS-CBN News online) who tackles both the administration and opposition’s considerations in forming their tickets, and Marichu Villanueva, who looks at opposition intramurals; Reli German, one of the strategists of the President, puts forward the Palace talking points on what’s going on.
Manuel Buencamino says he has a pithy rejoinder to the Palace talking points for the campaign:
“No matter how good she looks,
Some other guy is sick and tired,
Of putting up with her sh*t.”
The Inquirer editorial issues a warning on Gawad Kalinga.
Rene Bas says a new documentary by the son of war hero Chick Parsons will be released on February 3, to commemorate the Battle for Manila in 1945.
In the blogosphere, Tingog.com on a Filipina swindler in Canada. Torn and Frayed on why Filipinos walk so slowly in Western eyes (I’d give more points to the heat and how people don’t want to be sweaty and smelly).
Technorati Tags: documentary, elections, military, philippines, politics, president, Senate, state of emergency
The group led by Joker – Villar, Pangilinan, and Recto are the Gloria trojan whores.
Gloria is safe – she will get four possibly five, if Osmena is included, new whores in the Senate in addition to her current stable of bitches – Revilla, Lapid, Santiago and Enrile.
Slight correction on Buencamino’s piece and Sta. Ana’a analysis.
Net Export Reciepts account for less than 10% of the country’s GDP. Please note that this refers to merchandise exports. Sta. Ana’s figure is gross merchandise exports. Hence the 40% figure. ($40B out of a GDP of $100B)Slightly over 80% of our exports are heavily import dependent and with heavy imported inputs. (Electronics, garments)
However our agricultural exports get hurt the most with an appreciating currency. They hurt the plantation workers the most.
I believe that is what Sta. Ana is driving at. Hence the exodus abraod continues. The small middle class of course love it (American illustrados like Austero et. al.) The broad majority (Indio based) are getting hurt from both sides as those whose relatives who send home monies to help them are seeing their incomes also decrease.
But not to worry guys like Austero and company will find things cheaper at Rustans and the rest of the Ayala malls or the Chinese imitations at SM and Robinsons. .
Please note I use the brand Austero as the American illustrado mindset.
For the interested:
Under the PPP (purchasing power parity) measurement of GDP (The Big Mac index) Our currency is undervalued and should be in the range of Php 22-25 to the dollar.
Under current terms (Approx. Php 50 to $1.) Correctly we would like to keep it undervalued and the stronger it gets the more overvalued it could get for certain sectors of the economy.
Can you imagine what would happen if we allowed it to go to Php 35 to $1. Those who own and control Philippine assets would get richer in dollar terms. We could sell off part of our country to the Chinese or Koreans and repay our foreign debt. If the Ayalas own Php 100 billion in assets it would grow to be worth almost $3 billion dollars from approximately $2 billion. Also our GDP would almost reach $145 million instead of the present $100M. All due to the genuis of GMA our great economist.
Simply by the appreciation of the peso vs. the dollar. Can it happen? Yes it can. You do not have to be an economist to figure this one out.
Great article on statesmanship.
I would like to recall the words of Jesus Estanislao who once wrote that the greatest problem this country faces is the feudal mindset of our elite and their rent seeking ways that has deep historical roots.
The feudal social format is alive and well in the country. We once had a Chief Justice who use to carry the umbrella for Imelda. Now we have another who dutifully gets his just rewards for almost singlehandedly rewriting the constitution to benefit a politcal situtation with a prestigious appointment in an international body where he will join the cocktail circuit in the Big Apple. Why did he have to grovel for it. His was a co-equal branch of government that he seriously damaged.
Just pciked up this great quote from the Post and it relates to what Davide and Pangilinan did in their abortion of the constitution.
Wendy Doniger – “It doesn’t matter who (or what) presidents worship, as long as they don’t say the Great Pumpkin told them to invade Iraq.-“
“And the Arroyos announce their candidates in Negros Occidental.”
iggy boy! the self proclaimed real pidal! welcome back!
confirmed na tatakbong senador si goma under the admin slate.
newsinfo.inquirer.net/breakingnews/nation/view_article.php?article_id=46689
Expect a call from the labeling police:-)
Excellent analysis btw.
appreciation of the peso is a factor of demand and supply of the currency.
your thesis is tantamount to saying the president has repelled the law of demand and supply.
even with the depreciation of the peso during the previous administrations, the Filipinos were already migrating. Thank Ka Blas Ople for that. He opened the gateway and thanks for the decision of the Middle East to develop their countries with their petrodollars.
Faultfinders will see the evil of peso appreciation by not dicussing the cons of the depreciation which cause the flight of some investors to China.
“appreciation of the peso is a factor of demand and supply of the currency.
your thesis is tantamount to saying the president has repelled the law of demand and supply.”
So when the dollar was at 56 there was a demand for it and now that it’s at 49 there is less demand?
At the moment, yes. The policy question then becomes, is it right to leave it at that and let the exchange rate rise, among other things, to bolster the administration’s propaganda? Other governments like China and Malaysia, have mitigated the effects of supply and demand by managing their exchange rates in order to protect their productive sectors. China has delibarately undervalued its currency while Malaysia, during the 1998 Asian crisis, pegged the Malaysian Ringgit (at 3.8 to 1 US Dollar) to prevent meltdown.
Negros Occidental is not Pidal country. Iggy Arroyo decides who gets to run only in his 5th District. Gov. Maranon should work with the press to emphasize this fact. In other districts, including Bacolod City, the governor’s own NPC leaders are running against LAKAS/KAMPI bets of the Arroyos.
manuBuen… not less demand …”So when the dollar was at 56 there was a demand for it and now that it’s at 49 there is less demand?” .. SUPPLY…” it’s at 49 there is MORE SUPPLY” .. because of the dollars and euros from the cvj’s and many others.
/… [Actually less demand, too, e.g. price of oil crude.]
And some folks would hate to hear this, but GMA econ-policies have resulted in more pesos in the Treasury which means less need for foreign currency borrowing by the Government which means better credit rating which means P49. There remains debate, though, whether P56-to-$1 is better (helps Phil-exports) than P49-to-$1 (helps buy Belgian-chocolate or made-in-India medicine with less pesos).
/.. But the “natural” (or at least historical) trend is for the peso-to-dollar conversion rate to rise… to P100-to-$1 in our lifetime, for sure (unless the government does a “reverse stock-split” and create a nuevo-peso).
she’s survived the worst because her opponents are weak and the public doesn’t care. This allows us room to push hard for changes and look even beyond 2010
Tumpak etong si cvj, sa mga Austerong nagmamaangmaangan… keso, di raw pro-Arroyo kahit rabidly anti-Erap.
I’m hoping Manolo will soon realize how the Austeros plying around their duplicities are wittingly or unwittingly propping up the regime of a pervert president. She has perverted a presidential election, the constitution, the reading of economic stats, even the very souls of SC justices… what else? Thanks but no thanks Bong.
The matter of peso-to-??? conversion is of much lower importance in comparison to (1) employment and wages; (2) education, (3) infrastructure (e.g. energy, roads, water); (4) health-care.
/… Oh, yeah, law-and-order. People are dying.
One way to raise funds for the Philippine Treasury is to raise taxes on cigarettes. The money can then be used to:
.. improve health-care coverage for 16-and-younger
.. improve subsidized medicine for 55-and-older
.. scholarships for nurses and midwives
haven’t you heard? BSP is easing out its forex rules adopted way back in 1997 during the Asian financial crisis?
On the contrary, the “much hated/maligned OFWs (they don’t complain, do they?)send more dollars to compensate for any decrease in dollar values.
Read about the increase in remittances in 2006? Thus the increase in the supply of dollars and the appreciation of the peso.
Once the impeachment case reaches the Senate, it is over. The students, ordinary folk and other missing personalities in the anti-GMA street protests will be emboldened by such a development. This great majority will come out. Just get that complaint to the Senate.
The shapers of public opinion should do the country a favor. Concentrate on the elections for the lower house. Enough with the talk about the Senatorial race. Its composition will not matter once the impeachment case gets there. The mass actions plus international opinion against the most hated president in history will create noise that this land has never heard or felt before.
Exports less Imports=Net Exports GOOD
Imports of raw materials are necessary. It’s part of some agreements with buyers especially electronics to be sure that components are of good quality. Semi-conductors use gold threads for their microchips. These components are processed in another country. The principle of not putting all eggs in one basket. Don’t you notice the label: Assembled in ..(.put the name of the country)
People should be concerned more of the importation of cheap agricultural products that compete with the local producers. Likewise smuggled products that flood the blackmarket.
I again read our host’s entry and saw that Joker is in the UNO lineup. WOW! I thought that the anti-Marcos gang will only emerge again in 2010 to support a Binay presidential bid. This early, the mayor is already calling on them. Has Joker changed? During the impeachment of Erap, he was passionately arguing against the former president. He was grinding the axe like a woman scorned.
After supporting Erap in the presidential polls, Joker expected the then sitting president to use influence in his favor for a court case. When Erap said that it was interference to the judicial process as the SC has already decided on the matter, Joker made tampo. And tanim. hehehe. Yes people, this “ubusin ang mga corrupt” senator has a dark side other than being the lawyer of Ninoy Aquino in the case wherein the fallen activist was meted the death penalty. When Joker’s Makati district lost some pieces of land to Taguig by way of an SC decision, he asked Erap to interfere with the judicial process at the highest level. He expected Erap to come to his rescue because aside from supporting the former president in the elections, they go a long way back, since the Magnificent 12 days. Joker, like some snobs and other pretenders who fashion themselves as intellectuals, underestimated Erap.
“Ubusin ang mga corrupt,” is how he started his joke (Senate stint), which started the whole country crying (sitting on all those blue ribbon cases against GMA allies).
How forgiving Erap has been since being incarcerated is just amazing. I suppose, I underestimated him too.
bogchimash… as people concentrate on the elections for the lower house, the voters should be reminded that GMA is a miserable failure in the law-and-order metric. This administration fails in regards murdered or missing activists (labor union organizers, human rights workers, land-for-landless advocates, etc), police and military people assasinated by NPA’s, killed media “muck-rakers”. And worse, GMA fails in the basic law-and-order situation (eight-year-old girl from Pasig City just got abducted, tortured, raped, then murdered because her mother failed to pay their P30,000 debt to “five/six” loan shark). Will it shock anyone if another bank robbery in Metro Manila by a gang carrying long-guns happens by July 2007? Has the Chinoy and other businessmen-kidnapping stopped?
/.. GMA has “buck-stops-here” ownership, but the election of any congressman (and senator, provincial governor and city mayor) has to be in part based on how they will improve basic law-and-order.
Are you referring to the E-vat which was imposed by GMA to reduce the deficits that her own government created?
I would like to understand what the government deficit, which are denominated in pesos, have to do with the amount of foreign borrowings. (This is not the first time i’ve heard the two being related with each other, so it would be useful to know how one relates to the other.)
No i haven’t heard, but what the BSP did to handle the Asian Financial crisis back in 1997 is no longer relevant to the discussion. What matters is how the BSP and the government deal with today’s issue, which is the appreciation of the peso.
cvj,
here is the link of the news. Mainit pa.
http://www.gmanews.tv/story/28801/BSP-wrapping-up-review-on-easing-forex-rules
I beg to disagree that it is no longer relevant because the forex rules in 1997 still applies. I thought you want the appreciation managed.
Government deficit may be expressed in terms of pesos but the sources for which these deficits may be funded may come from foreign or domestic borrowings.
When I say foreign borrowings, it may be in terms of floatation of bond instruments or from international financial institutions. They come in dollars you know but converted to pesos at the current exchange rate.
Smaller government deficit less borrowings in terms of dollars.
What does Gloria do that makes the creditors happy?
Increase and expand consumption tax. (Burden the people with more taxes. Force them to swallow the bitter pill.)
Lower the tariff on imports.
Grant more tax incentives to foreign investors.
Grant more mining concessions to foreign mining companies.
Grant more sovereign guarantees on loans by private investors.
Lease more prime agricultural lands to foreign investors.
But what Gloria does makes the Filipinos poorer and more hungry, which contributes to
Decrease in population growth, which makes the creditors happier.
UPn student…Everybody shares your concern for the rising criminality. When people call for GMA’s resignation, it also forms part of the bases why she should be removed. The peace and order situation is a function of the PNP’s effectiveness. And no one has damaged the institution more than GMA and her greedy husband. GMA’s removal from office is actually a crime prevention drive too.
“cvj :
Please note I use the brand Austero as the American illustrado mindset. – hvrds
Expect a call from the labeling police:-)”
——————————————————-
Looks like this is your source of happiness right now. So I will never take that away from you. Enjoy!
Meanwhile I’ll be very excited to see how your and your ilks’ Evil will triump……
bogchimash…. that’s good!!! that most Filipinos’ are concerned about basic law-and-order.
/.. Now my next sentence is not to say that GMA has the responsibility…. but my perception, though, is that even if GMA were to leave Malacanang 3 days from now, the abysmal law-and-order problem persists 3 months later.
… that came out poorly-phrased.
MY perception is:
(1) YES.. that GMA retains command responsibility and should be held responsible for the abysmal law-and-order situation;… but…
(2) were GMA to leave 3 days from now, the law-and-order situation persists 3 months later.
Upn student. Yes. The way things seem at the moment, the situation may even persist beyond 3 months after GMA leaves. The PNP has been deeply damaged. Lacson was admired as PNP Chief by those who deal with policemen on a daily basis. It wasn’t just our Tsinoy brothers who praised him. The institution’s approval rating was highest during his time. Should his formula be adopted?
There is an October 2003 web-entry (signed by fedup, so you know it is trustworthy… or not) and a cut-and-paste is as follows:
/….
HIDDEN WEALTH OF SEN. PANIFLO LACSON
Houses of Sen. Lacson in U.S.
1011 Laguna Seca Loop, Chula Vista
2035 Sea Island Place, Chula Vista, California
14300 Terra Bella Street 73, Panorama City, California
2252 Mountain Ridge Road, Chula Vista, California
60 14300 Tara Bella St., Panorama City, California
3500 Plaza Boulevard, National City, California
2295 California St., San Francisco, California
3530 Locust Avenue, Long Beach, California
Houses in the Philippines
House in San Jose St., Ayala Alabang, Muntinlupa City, Philippines
280 El Grande St., BF Homes, Paranaque, Philippines
25 Kirishima St., BF Homes, Paranaque, Philippines
One residential house in Cavite, Philippines
Dollar Accounts of Lacson
* After winning the election in 2001 Lacson moved back the amount of $246,199.25 from his wife’s California Bank account to Union Bank of the Philippines. This is reflected in the U.S. Bank on June 5, 2001
* At the height of the impeachment trial of Pres. Estrada, Mrs. Lacson remitted the amount of $450,000 to her Bank of America account in California.
* Lacson opened several Bank accounts in his own name at the Bank of America branch in Chula Vista which in October 2000 had a balance of $285,133.00
* Wells Fargo Bank Account No. 201-8575365 in Los Angeles, California
* Lacson & his wife had 6 bank accounts in the US with a total deposit of more than $1.1 million based on the documents obtained from the ombudsman & the US District Court in San Francisco, USA.
* In the Philippines: Lacson’s wife remitted $100,000.00 to their account in the Bank of America California thru PCI-Bank BF-Aguirre Branch on Nov. 13, 2000.
* Two days later, Lacson’s friend by the name of Teresita Go sent $50,000 to the same account thru Hong Kong & Shanghai Bank in Makati City.
* Twelve days later, on Nov. 27, 2000 $150,000 dollars was remitted to same account thru same bank.
* A day after Christmas, Lacson’s wife sent her own account in California, the sum of $ 145,000.00 dollars from her account in the PCI Bank BF-Aguirre Branch.
* After EDSA 2 Lacson withdrew all the monies they remitted to US & moved the stash to a safer hiding place.
* All their Houses & Bank transactions are fully documented
* Bank records subpoenaed by Commissioner Miles Erlich, Asst. US Attorney of the Northern District of California detailed Lacson’s salting of more than a million dollars from the Philippines to his wife’s US accounts in the twilight days of the Estrada administration.
* All these information are reflected in the US based Financial Crimes Enforcement Network on Lacson’s wife, Alice, who is the subject of FINCENG Case No. 72192
website URL is:
http://www.gov.ph/forum/thread.asp?rootID=10613&catID=2
I was once priveleged to atend a forum meeting of “economists” who had Joseph Stiglitz as the guest speaker. One of the organizers of the forum , Noel de Dios was one of the organizers of the meeting. I personally believe that he is one of the best we have in the country. The rest of them are not as incisive or comprehensive like him. He is no only an econometrician but he looks at the the whole picture.
During the question period, I asked Noel what was the forex polciy of the government? The BSP is after all a public utility.
I have read the ideas as pronounced by a few you in your definition of fiscal and monetary policy. I do not get into debates with postings as you cannot tell which planet the writer is from. I am a Star Trek fan.
Now getting back to my question to Noel. He answered ‘managed float’. Stiglitz then looked at him and gasped.
The current definition of fixed exchange rates are pegging the rate along a high and low band. China practices a narrow band while we practice a wider band.
Our currency is not fully convertible. It is not listed on any commodity markets anywhere in the world most particularly the Chicago commodity exchange. It should be. That way you will see Tetangco’s and GMA’s hair turn white before your very eyes.
I srongly suggest you guys go to the private banking unit of Citbank and ask them for their brochures on currency trading on Asian currencies and they will describe in full detail the forex policies of each Asian country.
Please note that the overnite lending rate of the BSP is 9.75%. Japan is .25%. U.S. is 5.25%. EU is 3.25%.
I will not get into the liquidity wave that is buffetting financial markets all over the world but to give you a hint – India was just given the investment grade citation by the credit rating agencies last year. We are at junk level. Anything below investment grade is junk level. The difference is off course long term projections.
Budgets are basically year to year cash in cash out government projections. They do not include accruals which are off budget.
The Philippines is in the hole for a total of over $60 billion in debt in foreign currencies of the private and public sector. The formal economy GDP is approximately $100B at current rates. The formal reserves of dollars with the BSP is $23B. Any financial analyst will tell you that you are carrying a huge amount in foreign debt. Remember that principal and interest payments have to be done.
That comes from a peso based economy. The dollars come from OFW’s who do not produce a thing in the domestic economy and the exports produce very little in the domestic economy.
Hence an appreciation of the peso means for an import dependent economy it will be a boon for consumption. But not for production. But since a colonial economy is exactly that so who cares?
Why not simply get more pinays to marry Japs as Bernie Villegas had suggested sometime back to repopulate Japan and transfer their hard currency here.
How do you think we have been paying for the Sony’s and Toyota’s since God knows when. Tits and ass man thats how.
Sta. Ana is biased for the productive sectors and believces that markets should be set free but insists that we need a devalued currency as the ultimate protective cover.
Actually it would be best to make the currency fully convertible and you will see wide swings from 50 to 100 or down to 30. There are now new finaical products tohedge vs. these wild swings but at least Tetangco would not be lying when he says that market forces determine the rate.
Actually it would be best to shut doqwn the BSP and simply go down to free banking like it was in the 19th century.
For some this may be alien speak but this explains a great deal about the liquidity wave in the world. Believe me it ain’t GMA.
Davos Is for Wimps, Ninnies, Pointless Skeptics: Michael Lewis
By Michael Lewis
Jan. 30 (Bloomberg) — It’s become almost obligatory for the world’s most important economic people, at the beginning of each year, to travel joylessly to the base of a Swiss ski slope and worry. And to worry not privately, with dignity, but publicly, to anyone who will listen.
“The system is becoming very complex. The risk of some crisis happening is rising,” says Nouriel Roubini, chairman of Roubini Global Economics. “The world isn’t pricing risk appropriately,” says Steven Rattner, co-founder of Quadrangle Group. “Excessive borrowing and risk-taking,” intones Juergen Stark, chief economist for the European Central Bank.
“The last time we talked,” says William Rhodes, senior vice chairman of Citicorp Inc. (in case you didn’t hear him the first time), “I mentioned we’re going to get some adjustments some time in the future. So this is a time to be prudent.” To which Stephen Roach, chief economist of Morgan Stanley adds, “What’s occurring right now in markets and policy circles is a dangerous degree of complacency.”
Then Is Now
Actually, it was last year that Roach said that at Davos. But does it really matter? Examine the public statements extruded by the World Economic Forum any year and you’ll find the same warmed-over prudence, the same dreary feeling that someone is about to punctuate the nebulous tedium with a proposal to create a commission.
In 2004, former International Monetary Fund Chief Economist Kenneth Rogoff, newly arrived in Davos with a brain full of positive economic data, was asked about sentiment of his fellow elites. “I was surprised when I got here,” he replied. “The mood is surprisingly cautious given the data we’re seeing from around the globe.”
Surprised? A man of Rogoff’s stature should have known better — just as he should have known that Davos has little use for positive economic data, or global financial health. Davos is where people with no talent for risk-taking gather to imagine what actual risk-takers might do. Davos Man needs to sit in judgment; Davos Man needs to brood. So great is this need that he will brood about virtually anything, no matter how little he knows about it.
Much Concern
Derivatives seem to be this year’s case in point. Davos had hardly been up and groaning about the dangers of being alive before Bloomberg News reported what appears to be the general Davosian view: “The surging demand for derivatives is making financial markets more vulnerable to any slowdown in the global economy.”
The piece came with supporting quotes from European Central Bank President Jean-Claude Trichet, Bank of China Vice President Zhu Min and the deputy chief of India’s planning commission, Montek Singh Ahluwalia — but not a worrisome fact in sight. None of them seemed to understand that when you create a derivative you don’t add to the sum total of risk in the financial world; you merely create a means for redistributing that risk. They have no evidence that financial risk is being redistributed in ways we should all worry about. They’re just — worried.
Diluting Risk
But the most striking thing about the growing derivatives markets is the stability that has come with them. More than eight years ago, after Long-Term Capital Management blew up and lost a few billion dollars, the Federal Reserve had to be wheeled in to save capitalism as we know it.
Last year Amaranth Advisors blew up, lost more than LTCM, and the financial markets hardly batted an eyelash. “The financial markets in 2007,” some member of the global economic elite might have said but didn’t, “are astonishingly robust. They seem to be working out how to absorb and distribute risk more intelligently than any member of the global economic elite could on his own.”
Once the laughter subsided — and someone took down his name to make sure he didn’t make next year’s guest list — he might go on to point out that in spite of a great deal of political turmoil the markets have remained calm.
Quick Adjustments
The Sarbanes-Oxley Act sticks a wrench in the American market for initial public offerings, and the capital-raising business simply removes itself to London and Hong Kong. Thailand installs capital controls and the markets force it to reverse its policy, virtually overnight — again with nary a ripple. The Brazilian real is now less volatile than the Swiss franc; Botswana’s debt is now more highly rated than Italy’s. Oil prices double, the U.S. housing market tanks — no matter what happens, financial markets adjust quickly and without hysteria.
There are obviously a few things to worry about just now in the world, but the inability of traders to find a sensible price for the spread between European junk and European Treasuries isn’t one of them.
Waste of Breath
So why do these people waste so much of their breath and, presumably, thought, with their elaborate expressions of concern? Even if these global financial elites knew something useful that you and I don’t — that, say, 50 hedge funds were about to go under and drag with them half the world’s biggest banks along with a third of the Third World — they would be unlikely to do anything about it.
And if they really believe the markets mispriced risk, or were about to adjust, they must also believe they could make vast sums of money if they quit their day jobs and opened a hedge fund to take the other side of stupid trades. But they don’t really believe that, or at least some of them would be off doing it, rather than spilling the beans to Bloomberg News.
Is perhaps the only point of standing in the snow and expressing your doubts to a television camera to prove that you are the sort of person whose doubts matter?
UPn student. Lacson is still haunted by the Rosebud charges after signing the waiver? Maybe blogger/forum contributor “fedup” should advise the FG to do the same because someone who has lesser control of the powers of the State got away with “crimes” after doing so.
Why should be included in the commodity exchange?
From the word commodity, basic primary products are what are traded in the commodity markets. Which Chicago Commodity market, the Chicago Mercantile Exchange or Chicago Board of Trade.
Why would Stiglitz gasp?
He should know that Asian and almost all countries use managed float currency system as opposed to the fixed currency system which was found to be risky after the Asian financial crisis.
Managed float simply means a central bank or government is intervening in the floating exchange rate system of the country.
Basically in the economic context, all countries are in the managed float. Fixed currency exchange refers to the pegging of the currency to a commodity or to another currency like China’s and Malaysia’s before 2005. These two countries have already already adopted managed float after it broke away shackled to US dollar for seven years. It is now using “basket of currencies”.
Full convertibility refers to current and capital accounts convertibility.
China has not also achieved full convertibility.
I shudder when people talk about economics when they can not distinguish one from another. Instead of information, they confuse the people with high fallutin’ terms.
This is not about GMA, this is about Economics explained in layman’s language.
Ca T, i read the link, you’re right it’s relevant to the discussion especially this portion:
…market players have interpreted the BSP moves to liberalize forex flows as an attempt to curb the appreciation of the peso.
The BSP, in the wake of Thailand’s short-lived decision to restrict the appreciation of the baht, had said it would not implement similar policies on the peso, saying that the exchange rate was best left to market forces…
Thanks for the info.
hvrds, i second Ca T’s question, why did Stiglitz gasp? Is it because managed float goes too far or not far enough? Also, are you serious with the following recommendation?
From that standpoint, then the link that Ca T provided on the BSP’s moves looks like a step in the right direction.
…sayang. i’d rather have sonia roco than john osmena. and tito sotto should replace loi instead of JV ejercito.
they shouldn’t. unless they want to see the third farce help arroyo win.
Cvj,
I asked the question which convertibility is he talking about?
Current or capital account?
The way I understand by his statement is he’s referring to the clean float and not the convertibility that I have in mind.
Convertibility of the currency is a mutual agreement. It was only recently when the Philippines allowed the convertibility of the Chinese Yuan and Korean won.
Foreign exchange reserve is not only a factor of capital account convertibility. There are such things as non-performing loans of the banks, huge government deficits among others. China and India are also suffering from these economic maladies.
UPn Student said: “… And worse, GMA fails in the basic law-and-order situation (eight-year-old girl from Pasig City just got abducted, tortured, raped, then murdered because her mother failed to pay their P30,000 debt to “five/six†loan shark)…”
What about Mayor Eusebio and the other local chief executives? Would you hold them responsible too? Don’t they have the larger responsibility? Don’t they exercise operational (day-to-day) supervision and control over the police?
Aames, yeah i agree that it’s a stretch to attribute that particular tragedy to GMA. However, as President from 2001 to 2004, and de-facto occupant of Malacanang since then, Arroyo is primarily responsible for the over-all quality of governance. A non-partisan measure would be the World Bank’s rule of law index which is one of the six governance indices that it monitors.
The Rule of Law index measures “the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, the police, and the courts, as well as the likelihood of crime and violence“:
Year Index Margin of Error
1996 -0.16 0.16
(continued from above)
1998 -0.10 0.19
2000 -0.55 0.15
2002 -0.59 0.13
2003 -0.65 0.13
2004 -0.67 0.12
2005 -0.52 0.13
[Source: Daniel Kaufmann, Aart Kraay, and Massimo Mastruzzi, Governance Matters V:Aggregate and Individual Governance Indicators for 1996-2005, The World Bank, September 2006]
Aside from its inherent value as a measure of quality of life, as i mentioned before, rule of law has also been found to be positively correlated with a nation’s wealth as measured per Capita GDP. The implication of the above is that GMA’s governance over the last six years has had a negative effect on our economic performance, i.e. we would have grown faster if she had performed better in this aspect. As it is, her record over that period is no better than Erap on his last year as President.
Aames… Yes… yes to mayors(and councilors, baranggay captains) who hold day-to-day responsibilities and oversight.
/..Yes to GMA who hold command-responsibility over the PNP. Yes to GMA — the law-and-order in the Philippines is abysmal!!!
“I shudder when people talk about economics when they can not distinguish one from another. Instead of information, they confuse the people with high fallutin’ terms”
“This is not about GMA, this is about Economics explained in layman’s language”.
Ca t on February 1st, 2007 at 7:43 pm
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Hit on the nail head Ca t.
As much as I am impressed with his gift of words, I just have so many doubts on what he saying most of the times. I always got lost reading his comment because its tooooo lengthy. And then there’s the name dropping that makes it even more less credible even worst give us opinion on who is the best economist in the world.(implying that Gloria is a so so economist)
Tsk tsk tsk…Sometimes we really have to guard our hatred towards one person. It damages and hurts us more than the person that we hate and wanted to demolish and hurt.
As expected:-)
I remember a certain respected professor, when he wants to know whether the student really knows the subject, would say, “explain it to me as though I were a 6 year old.” I think it is a good standard. As regards info that is available somewhere else, perhaps it is good blogging etiquette to just paste the link.
bogchimash, on the other hand, a mentor i respect would say “RTFM”.
imho, i think it’s a privilege to hear someone like hvrds give a first person account of his encounter with Joseph Stiglitz. that’s one of the things that make this forum worth visiting. i also think that his comments are on the long side because they cannot be shortened without loss of information. for terms i cannot understand, that’s what the dictionary (or google) is for.
hvrds,
thanks
hey take it easy. i am not on anyone’s side. all i wanted was to hear more original thoughts. also, so that lesser mortals like myself do not have to second guess anymore, i hope these original ideas can be connected to other goings on. the usage of links will provide more space for these further elaborations. i mean hvrds no disrespect. if you think about it, an implication of my entry above is that i actually value the person’s original thoughts and would like to hear more of it. peace man
bogchimash, my apologies. likewise, no disrespect intended
bogchimash,
Can you please bring up when that Supreme court decision handing taguig the said lands was handed down?
I reckon that’s the 1993 case but I keep getting a CA decision only.